The ad industry returned to work Monday with news of another holding company mega-deal. Not a merger this time, but an acquisition by Omnicom, which purchased the ecommerce business Flywheel for $835 million. Omnicom said the deal is its largest acquisition ever, which feels like a telling statement about evolving priorities and the future of the industry itself.
Omnicom, parent company of iconic creative agency brands like DDB and BBDO, did this deal because Flywheel helps brands “sell more goods more efficiently” in digital marketplaces like Amazon, Walmart and Alibaba. In other words, Omnicom wants to be better in retail media and ecommerce, which it expects to grow by 50%, to about $7 trillion, by 2025.
“The acquisition of Flywheel significantly broadens our reach and influence in the rapidly expanding digital commerce and retail media sectors, two of the fastest-growing parts of the industry,” said Omnicom CEO John Wren in the release announcing the deal.
“The retail world is fiendishly complex and ever changing,” added Duncan Painter, chief executive of Flywheel. “But the goal of each brand remains the same—to use all the available data and the best technology to drive sales and scale profitably. Whichever brands have access to this and the best expertise for how to take action, will win.”
Painter’s perspective on brands, especially the part about driving sales and scaling profitably, feels noteworthy.
It’s long been fashionable in the industry, especially in Canada, where so many independent agencies are thriving, to casually criticize the holdcos for being too big and slow to respond to change. Their critics suggest they are more focused on driving down costs to maintain shareholder value, rather than innovating and investing in new paths to the future, for their clients and themselves.
But at the same time, I’m regularly struck by the nostalgia and romanticization for the advertising and the power of brands from another age. As much as conference speakers and thought leaders venerate the future, I sometimes feel like, in aggregate, the industry underestimates just how radically consumer and media habits have changed in the past 20 years, and overestimates how much people think about brands in their day-to-day life.
We’re guilty of it, too. As much as we know that televsion no longer holds the same power to reach consumers and promote brands, we have a bias toward TV ads and clever films. It’s a legacy attitude we’re aware of and working hard to change.
And you could see it in some of the commentary about another big industry deal just a couple of weeks ago: the merger of Wunderman Thompson and VMLY&R into a single agency brand called VML. The move was certainly about costs, but it was also a decision to break with the past.
“The future of building strong brands and businesses requires the interconnectivity of brand experience, commerce and customer experiences,” said Jon Cook, VML’s new global CEO at the time.
However, it wasn’t hard to find people lamenting the end of legacy agency brands J. Walter Thompson and Young & Rubicam. One well-shared column suggested that if WPP leaders don’t appreciate the value of those agency brands, they may not appreciate the value of brands at all.
As much as those agencies did incredible, ground-breaking innovative advertising in the last century, there’s nothing magical in the names themselves that should make them sacrosanct. And more importantly, no marketers looking to “drive sales and scale profitably” in today’s reality should care at all about what J. Walter Thompson and Y&R did in the past.
There is much to critique about how the big agency holding companies operate. But we can’t mock them for being slow and stuck in the past, and then complain when they make big moves with an eye to the future.